Scope Ratings GmbH (Scope) monitors and reviews its credit ratings on an ongoing basis and at least annually, or every six months in the case of sovereigns, sub-sovereigns and supranational organisations.

Scope performs monitoring reviews to determine whether material changes and/or changes in macroeconomic or financial market conditions could have an impact on the credit ratings. Scope considers all available and relevant information when undertaking the monitoring review.

Monitoring reviews are conducted by performing a peer comparison, benchmarking against the rating-change drivers, and/or reviewing the credit ratings’ performance over time, as deemed appropriate by the Lead Analyst or Analytical Team Head, in addition to an assessment of all aspects of the relevant methodology/ies, including key rating assumptions and model(s). Scope publicly announces the completion of each monitoring review on its website.

Scope completed the monitoring review for MFB Hungarian Development Bank Private Limited Company (long-term local- and foreign-currency issuer and senior unsecured debt ratings: BBB/Stable; short-term local- and foreign-currency issuer ratings: S-2/Stable) on 6 March 2024.

This monitoring note does not constitute a credit rating action, nor does it indicate the likelihood that Scope will conduct a credit rating action in the short term. Information about the latest credit rating action connected with this monitoring note along with the associated rating history can be found on www.scoperatings.com.

Key rating factors

For the updated rating report accompanying this review, click here.

MFB Hungarian Development Bank’s (MFB’s) BBB rating reflects the guarantee framework for its liabilities provided by Hungary (BBB/Stable), which is the key factor for aligning MFB’s ratings with the ratings of the sovereign. The explicit, direct, and irrevocable guarantees cover the bonds issued, credit and loans taken, deposits from the interbank market, and replacement costs of currency or interest rate swaps entered into by MFB for fundraising purposes. The funding guarantee amount is capped by Hungary's central budget, and the bank is prohibited from exceeding this limit in its debt-raising activities.

Scope acknowledges that the bank holds significant strategic importance as a pivotal government-related entity (GRE) for the Hungarian state, entrusted with the implementation of crucial economic and social policies. In its commitment to bolster MFB's lending capacity, Hungary has strengthened the bank's capital position on numerous occasions.

Challenges include: i) a modest but stable profitability; and ii) limited loan portfolio diversification. These factors are indicative of the development bank's public policy mandate.

The Stable Outlook reflects Scope’s assessment that the risks to the ratings over the next 12 to 18 months balanced.

The ratings/Outlooks could be upgraded in the event of an upgrade of Hungary.

The ratings/Outlooks could be downgraded in the event of: i) a downgrade of Hungary; and/or ii) changes in the legal framework or guarantee structure that notably weaken government support for MFB.

The methodology applicable for the reviewed ratings and/or rating Outlooks (Government Related Entities Rating Methodology, 13 July 2023) is available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst Jakob Suwalski, Senior Director.

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